Analysis: What does Walgreens Boots Alliance's Australian adventure tell us?

The health and beauty giant is also said to be looking to either acquire or distribute local H&B brands for its worldwide network.   

Given the vagaries of Australian pharmacy ownership regulations, WBA would presently be unable to open company-owned outlets in the market. It could, however, operate a franchised model, though this would entail more effort and make ROI harder to come by.

The chosen banner would be its UK-based Boots fascia, as this has far more brand recognition among Australians than Walgreens.

Quoted in local media, WBA global brands president Ken Murphy said the drugstore giant would prefer to operate its own outlets. “To justify the investment in Australia, we’d have to have the capability to establish our own chain,” he said.

“We’d be happy to do that by acquiring pharmacies, but we’d have to have the legal permission to do so.”

Under current Australian law, pharmacy chain ownership and operational location is frozen until mid-2020. State-level regulations could change sooner, though, with a government review due to report in March 2017.

In common with many developed markets, the Australian healthcare system is coming under increasing pressure.

WBA believes a new retail pharmacy entrant could reduce some of that strain, with Murphy pointing to its sophisticated pharmacy systems, logistics and pharmacist training as some of the benefits it could bring to the sector in Australia.

Planet Retail is not entirely surprised that WBA is seeking expansion into new global territories.

Legislation issues aside, Australia makes sense as a first port of call, given its links with both the UK and US.

M&A targets  

Certainly, several potential M&A targets exist, given the regional spread of the Australian pharmacy sector.

The market is estimated at approximately US$11bn a year by value, which is hardly vast.

Yet we feel WBA, should it attain a foothold, would be confident of rapidly scaling up the business with a view to becoming a major player within a relatively short timeframe.

Such a move may have long-term advantages geographically, as well.

Australia could act as a useful staging point between WBA’s US operations and the lucrative Asian markets of Japan and China. While the company has yet to signal any intent towards expansion in this region, it would be surprising were it not on its radar as a future goal.